When Wall Street Meets Antitrust Enforcers

Antitrust enforcers are increasingly scrutinizing the world's major banks.

NEW YORK -- Antitrust enforcers are
increasingly scrutinizing the world's major banks.

The U.S. government's investigation into a scheme to rig
bids for investment contracts involving municipal bond proceeds
has resulted in major monetary settlements with JPMorgan Chase &
Co, UBS AG, Bank of America Corp and
others. And there is a high-profile probe into the manipulation
of the major interbank rates, including the London Interbank
Offered Rate, or Libor.

The consensus of lawyers who gathered in Manhattan on
Thursday at a panel hosted by the New York State Bar Association
appeared to be that Wall Street should get used to the attention
from antitrust enforcers. Some lawyers warned of potential
complications as the trend widens.

A big concern is the application of the corporate leniency
program overseen by the Department of Justice's Antitrust
Division.

The program, which began in 1978 and was revised in 1993,
has been widely viewed as a huge success because it gives cartel
members incentives to report illegal schemes to authorities. But
the Antitrust Division has relatively little experience applying
the program to the financial sector.

John Terzaken, an antitrust partner at Allen & Overy, said
it was unclear just how that program would play out. Under the
leniency program, the first company to admit to participating in
an antitrust conspiracy to government lawyers is the one that
obtains immunity from criminal prosecution for antitrust
violations.

NO GUARANTEES

Coming in second does not guarantee anything and can expose
a company to criminal prosecution. But given the importance that
many major financial institutions play in society, Terzaken
suggested that the Antitrust Division might be willing to forgo
criminally prosecuting those banks that are not first in the
door under the leniency program.

"It's not clear in this case that that's going to happen
with respect to other financial institutions that might be
colluding with a leniency applicant," said Terzaken, referring
to the company first to report.

Terzaken, who noted that the Antitrust Division does not
have a history of negotiating nonprosecution agreements or
deferred prosecution agreements with companies, said it was
unclear how financial companies that do not receive immunity
under the leniency program would be treated.

"It's something they're going to be challenged with," said
Terzaken, who in July left the antitrust division, where he was
director of criminal enforcement.

The banks - and their lawyers - will also face tough choices
as antitrust enforcement picks up, said Karen Yen, an in-house
lawyer at UBS.

A bank's various market regulators do not put the same
emphasis on being first to report potential wrongdoing as the
Antitrust Division, but they expect the same cooperation, Yen
said.

That means once a bank commits to reporting potential
wrongdoing to the Antitrust Division, it also has to agree to
disclose the same information to other market regulators that do
not offer the same protections, Yen said.